Murdoch Seizes Wall St. Journal In $5 Billion Coup

British rival Pearson, which publishes the Financial Times and held some informal talks about teaming with General Electric to bid on Dow Jones, is exploring distribution options with a number of media outlets, Pearson chief executive Marjorie Scardino told the British press this week.

Catherine Mathis, vice president of corporate communications at the New York Times Co., said, "We have a number of things in the works to ensure we remain competitive."

There appear to be no regulatory hurdles to the deal. Though the Federal Communications Commission prohibits one company from owning a television station and local newspaper in the same city -- News Corp. owns a station in New York -- regulators consider the Journal a national newspaper.

The Securities and Exchange Commission is probing possible insider-trading violations related to the deal. Dow Jones director David K.P. Li could face civil charges if he is found to have passed news of Murdoch's bid to an acquaintance in Hong Kong, whose daughter bought more than 400,000 shares of Dow Jones stock before Murdoch's offer became public. Li denies the allegations, and neither side thinks the investigation is material to the deal.

Dow Jones stock closed up $5.82 a share yesterday at $57.38. News Corp. stock closed down 15 cents per share at $21.12.

Murdoch's bid was opposed by a number of members of the Bancroft family, some past and present Journal employees and media pundits. They feared that the naturalized American press lord would sully the Journal or use it to further his political and business interests, as he has done with other properties he owns.

In a letter to Journal readers published in today's editions, publisher L. Gordon Crovitz writes, "The same standards of accuracy, fairness and authority will apply to this publication, regardless of ownership."

Murdoch proposed, and Dow Jones eventually agreed to, the creation of a five-member editorial board to act as a buffer between Murdoch and the Journal newsroom and have a say in the hiring and firing of two of the paper's top editors. Harold Evans, who worked for Murdoch as editor of the Times of London, has said Murdoch will shred such agreements when he deems necessary. News Corp., on the other hand, says Murdoch takes such pledges seriously; Journal managing editor Marcus Brauchli approved the composition of the proposed editorial board for his paper.

Faced with the same problems as other newspapers, the Journal may have been forced to trim staff and reduce its budget if the Bancrofts had rejected the deal. The descendants of the modern Journal's founder were so bitterly split by Murdoch's offer that some family members have publicly rebuked others and one, Leslie Hill, quit the board in protest last night.

Hill, a retired airline pilot, was among those who fought Murdoch's bid and sought rivals, saying the media mogul would meddle with the Journal.

"It's a bad thing for the Journal and American journalism that the Bancroft family could not resist Rupert Murdoch's generous offer," former Dow Jones director Jim Ottaway Jr. said in a statement last night. Ottaway voted his 7 percent of Dow Jones stock against the takeover. "I hope the Bancroft family, which has been torn apart by Murdoch's poison pill offer, will enjoy family peace after so many years of patient and caring support for Dow Jones and its people," Ottaway added.

The Bancrofts hold 64 percent of Dow Jones controlling stock. Both sides estimated that Murdoch needed about half of that figure -- combined with shares of common stock, which both sides assume will approve the buyout -- to win Dow Jones. By last night, nearly two-thirds of the Bancroft family had voted for the takeover, said sources close to the deal who spoke on condition of anonymity.

Murdoch was able to exploit divisions within the Bancroft family. Some arms of the 35-member family wanted to take Murdoch's money right away. Others opposed the offer at all costs. Others -- such as Crawford Hill, who wrote a long letter to family members published on the Journal's Web site last week -- scolded the family, saying their passivity had made the sale to Murdoch, or anyone, inevitable.

Dow Jones is the most recent family-controlled newspaper company to end a historic run.

Last year, the venerable Knight Ridder newspaper chain disintegrated, sold to rival McClatchy Co., also family-owned, which kept some parts and sold off others. Earlier this year, the Tribune Co. chain agreed to go private in a deal that would turn over ownership to real estate billionaire Sam Zell and the company's employees.

Like Dow Jones, the New York Times Co. (run by the Sulzberger-Ochs family) and The Washington Post Co. (controlled by the Graham family) have two classes of stock that restricts the majority of voting power to a small group of family members, allowing the company access to money in the public markets while retaining control of its publications.

Newspaper analyst John Morton said none of the other family-controlled chains are likely to go the way of Tribune and Dow Jones.

"The McClatchys, Grahams and Sulzbergers are fairly cohesive," Morton said. "We found out we couldn't say that about the Bancrofts toward the end."